HLS Therapeutics Inc (TSX: HLS) is a Canada-based company specialized in the pharmaceutical industry. The Company acquires and distributes commercial stage and branded pharmaceutical drugs for the North American markets. It focuses mainly on treatment products for the central nervous system and cardiovascular specialties in Canada.

Key highlights 

• Clocked higher adjusted EBITDA: In Q3 2021, the company reported adjusted EBITDA of USD 6.9 million increased by USD 2.4 million or 53% from the same period in the prior year as a result of the USD 1.9 million increase in revenues on the back of higher products sales of Vascepa in Canada and higher royalty revenues from royalty interests.

Source: Company filing

• Higher cash from operations: The company’s cash generated from operations was of USD 3.6 million in Q3 2021, compared to USD 2.4 million in Q3 2020. While for the 2021 year-to-date period, its cash flow from operating activities stood at USD 12.5 million for the first three quarters of fiscal 2021 compared with USD 3.5 million for the first three quarters of fiscal 2020. The increase is attributable to a reduction in required non-cash working capital and the higher Adjusted EBITDA in fiscal 2021.

• Growing prescription momentum: Despite the pandemic's influence on market reopening, Q3 2021 efforts resulted in a 30% increase in Vascepa prescribers and a 23% increase in Vascepa patients compared to Q2 2021, while Vascepa product sales grew 33% sequentially.

Source: Company Filing

Financial overview of Q3 2021 (in thousands of U.S. dollars)

Source: Company Filings

• The company generated revenue of USD 15.0 million in Q3 2021, against USD 13.1 million in the previous corresponding period. The rise in revenue was primarily due to higher Vascepa revenue, along growth in Royalty revenues.
• In Q3 2021, the company narrowed its operating loss at USD 0.3 million, against a loss of USD 1.7 million in pcp, the lower operating loss was primarily due to higher revenue and lower G&A cost.
• Net loss stood at USD 1.9 million, compared to USD 1.7 million in the previous corresponding period. Higher finance and related cost dragged the company’s net loss.

Risks associated with investment

The company is exposed to various risks factors, including risks related to the specialty pharmaceutical industry, economic factors, and many other factors which are beyond the management control. Future growth of the company is highly dependent on the performance of VASCEPA. Any deviation from the forecasted performance may adversely affect the company. 

Valuation Methodology (Illustrative): EV to EBITDA 

Stock recommendation 

The company’s revenue and adjusted EBITDA grew in Q3 driven by strength and resilience from the foundational products as well as a growing contribution from Vascepa, which is a key positive. Encouragingly, the percentage of patient-physician visits that are taking place in-person is growing again and top health officials in Canada's largest provincial jurisdiction are publicly urging physicians to increase their face-to-face interactions. Furthermore, the firm has plenty of cash on hand, allowing it to consider extending its product line in Canada and the United States through in-licensing or M&A agreements. Therefore, based on the above rationale and valuation, we recommend a "Speculative Buy" rating at the closing price of CAD 15.04 as on December 9, 2021. We have considered Hamilton Thorne Ltd, Quipt Home Medical Corp, Knight Therapeutics Inc, etc. as the peer group for the comparison.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

 Technical Analysis Summary:

1-Year Price Chart (as on December 09, 2021). Source: REFINITIV, Analysis by Kalkine Group 

MAV Beauty Brands Inc.

MAV Beauty Brands Inc. (TSX: MAV) is global personal care which offers premium quality hair care, body care and beauty products to consumers. The company has a diversified portfolio of four complimentary personal care brands – Marc Anthony, Renpure, Cake Beauty and The Mane Choice.

Key Updates:

• The company has its own in-house teams, including brand leaders, research and development experts and creative designers, which helps to determine the changing needs of the consumers. Moreover, the company also has a wide distribution network and supportive logistics partners, which helps to enhance their in-store placement and also increase the amount of shelf space across the stores in order to gain the visibility of its brands.
• The company reported a demand recovery from its international segment and posted a revenue of USD 5.4 million in 9MFY21, reflecting a 20.2% y-o-y growth. Continuation of the above trend would likely to boost the company’s overall performance.

Q3FY21 Financial Highlights:

• MAV announced its quarterly result, wherein the company posted revenue of USD 24.739 million, lower than USD 31.741 million in pcp. The decline was primarily due to lower sales volumes from the Canada/US region.
• Gross profit stood lower at USD 10.349 million, as compared to USD 15.748 million in pcp. The decline was primarily due to lower revenue, partially offset by a slightly lower cost of sales.
• The quarter was marked by selling & administrative costs and inclusion of impairment of goodwill amounting USD 129.033 million.
• Adjusted EBITDA stood lower at USD 3.114 million, as compared to USD 8.700 million in pcp.
• The company reported a net loss of USD 103.146 million, as compared to a net profit of USD 3.559 million in pcp.

Q3FY21 Income Statement Highlights (Source: Company Report)

Risks: The personal care segment is highly competitive in nature, and hence it might receive stiff competition from its peers, leading to decline in market share and sales volume.

  Valuation Methodology (Illustrative): Price to Earnings-based

Stock Recommendation:

Owing to the recent growth in the e-commerce segment, the company is planning to mark its presence within the online category, which is a key positive and is likely to support the company’s upcoming sales volumes. We have valued the stock using the Price to Earnings based relative valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered peers like Gildan Activewear Inc, Roots Corp etc. Considering the aforesaid facts, we recommend a ‘Speculative Buy’ rating on the stock of MAV at the last traded price of CAD 1.24 on December 09, 2021.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

 Technical Analysis Summary:

One-Year Technical Price Chart (as on December 09, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.